A Registered Investment Advisor, Member FINRA.
A Registered Investment Advisor, Member FINRA.

All posts by: aciwealth

Q1 2016 Quarterly Update and Market Outlook

>Q1 2016 Year-to-Date and Market Outlook Update

The video below reviews performance for all 6 Process Portfolios results year-to-date through April 15, 2016 and also includes an updated Market Outlook near the end.

2016 began with the worst January in at least a generation and a return to higher levels of volatility thanks to central bank statements and decisions that seem to be increasingly opaque and unpredictable to some market watchers. I’ve been fortunate in that the Fed hasn’t done anything far distant from my expectations, at least so far. We’ve also seen the financial media predictably stoking fear and the usual parade of media guests short on data but long on opinion.

Regardless, careful students of the markets have seen a fair number of signs that suggest we may see smoother waters later in the year, as long as the economy does not move onto a recessionary footing.

Overall, reasonable performance with 4 of 6 portfolios beating the benchmarks, and 3 of 6 outpacing the broad market. Most portfolios have managed to do so with less risk than investing in an index fund. It’s fair to say it’s been a very good quarter for the 3 portfolios that clocked a 4%+ return, 2 with substantially less risk than buying an S&P 500 index fund. That’s a nice result for such a tumultuous period.

The video below features the executive brief and results updates in the first 4 slides. Feel free to use the video player’s tools to skip ahead to what you are interested in. Thereafter there is a little more “color” on each portfolio followed by an updated Market Outlook. Rounding out the periphery of the presentation are descriptions of each ACI Process Portfolio, including risk management.

This video concludes with the always exciting regulatory disclosures, which seem to get longer by the day. We can thank the admirable solidarity law school graduates in government demonstrate with their private sector compatriots, constantly striving to make sure their fellows on the other side of the fence have plenty of work.

As I know everyone loves to read the disclosures, I’ve had our theme music looped at the the end to give you an even better reading experience.

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Warm Regards,

Dak Hartsock
Chief Market Strategist
ACI Wealth Advisors, LLC.
Process Portfolios, LLC.

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What’s Up With The Economy? Recession Probability and Business Conditions Update

 

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image source unavailable

There has been a lot of economic doom and gloom talk over the last couple months, with media “expert” after media “expert” saying the US economy is about to fall into a recession. It comes with the predictable warnings about a bad bear market. The vast majority of these talking heads are just voicing opinions based on their own views and often get emotional when voicing their perspective. The problem with these “experts” is there very little in the way of factual economic data to support any of their positions.

Understand that investing is not an activity that benefits from either uninformed opinion or emotions. In fact, the opposite is true – uniformed opinions and emotional decision making often cause grief to investors.

Success in the investment game is primarily about WHAT IS, not WHAT IF. What IF is the progenitor of fear and greed, arguably the cause of more financial grief than Alan Greenspan (that was a market nerd joke). What IS, by definition, restricts consideration and decision to the facts at hand.

I’m sure you’ve gone to a doctor at some point in your life because you had a cold – runny nose, sore throat, a bit of fever, maybe some aches and pains. Has the doctor ever said, “What if this isn’t a cold? What if this is pneumonia? What if one of your lungs is collapsing? Could it be that you have cancer? Maybe you are sniffling because you are about to fall victim to a hemorrhagic fever and the bleeding has started in your sinuses? Maybe you are achy because you are going to come down with Dengue Fever? Is it possible this is Malaria?

Do you believe the doctor could effectively manage your condition if the diagnostic conversation was about What IF rather than What IS?

Investing is no different. Any effective conversation or action has to be about What IS. What IF is basically irrelevant.

So, let’s look at What IS.

At the most recent reading, the Recession Probability Indicator is cruising along at a steady 12, meaning the overall investment environment continues to be stable. That is subject to change, but for right now there is no recession on the horizon and in fact several key areas of the economy strengthened in the most recent month. If you aren’t familiar with the RPI, CLICK HERE to see how well it works.

RPI Graphic March 2016 update

Manufacturing, responsible for about 30{1b789970f5b587cdad7e2a0d5c032cbf2e438ab9022fea5c2ba3cf7af142fa35} of our economy, moved back into expansion mode last month for the first time since last fall and the non-manufacturing sector of the US economy also strengthened a bit, which is good news for the other 70{1b789970f5b587cdad7e2a0d5c032cbf2e438ab9022fea5c2ba3cf7af142fa35} of our economy.

A reminder – just because there is no recession doesn’t mean the market can’t go up and down, but that history vastly favors those who stay invested despite volatility, as long as there is no recession imminent.

If you’d like some evidence, take a look at the facts– Why Recessions Kill Investment Portfolios.

Fear helps the media sell advertising and brokers increase commissions, but it doesn’t help your investment portfolio get you to retirement with the assets you need to live the way you want to.

The point? Don’t let short term noise get in the way of a solid investment plan. Only impending recessions should do that.

For those interested, here is a link to the most recent Business Conditions Report by the American Institute of Economic Research– CLICK HERE.

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To Smarter Investing,

Dak Hartsock
Chief Market Strategist
ACI Wealth Advisors, LLC.
Process Portfolios, LLC.

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Cut Your Taxes: Put Money In Your Retirement Accounts

image source fox news
image source fox news

It’s that time again – Uncle Sam wants his money and smart investors are looking for ways to reduce their tax burden.

One of the simplest ways is to contribute money to your retirement. If you are self-employed, you may be able to deduct up to $53, 000 from your 2015 Earned Income and then use that money to fund your retirement. The best part? In most cases, you can take that contribution straight off your taxable income – it might even drop you a tax bracket.

The deadline for contributions is April 15, 2016. The earlier you make your contribution the better. If something happens and your contribution gets delayed for whatever reason the IRS couldn’t care less. They’ll tax you on that money. Give yourself time for the unexpected and get your contribution in as soon as possible.

Traditional IRA
a. Under 50 — $5500
b. Over 50 — $6500
c. Remember to report your contribution – it’s a deduction UNLESS you have contributed to a 401k for 2014 in which case you may not be able to deduct your IRA contribution. Check with your tax professional and/or 401k plan administrator.
d. You cannot contribute to an IRA if you do not have earned income.
e. If you are over 70 ½ you cannot make a contribution to a Traditional IRA.

ROTH IRA
a. Income limits as follows;
i. Single tax filers: Up to $115,999 in Modified Adjusted Gross Income. Partial contributions possible between $116,000 – $130,999.
ii. Joint tax filers: Up to $182, 999 in Modified Adjusted Gross Income. Partial contributions possible between $183,000 – $193,000.
b. Your contribution is not a deduction.
c. You can contribute to a ROTH IRA at any age, provided you have earned income, meet the income limits, and are not disqualified due to already funding a traditional IRA for the period.

SEP IRA (Self Employed)
a. 0 – 25{1b789970f5b587cdad7e2a0d5c032cbf2e438ab9022fea5c2ba3cf7af142fa35} of your compensation up to $53,000.
b. Must be a sole proprietor, partnership, business owner or earn and report self employed income.
c. Eligible employees must receive the same percentage contribution.
d. Remember to report your contribution – generally SEP IRA contributions come off your Earned Income total on a dollar for dollar basis, so you might drop a tax bracket. Check with your tax professional.
You can contribute to an IRA subject to the above restrictions even if you have already contributed or maxed out your 401k for 2015.

ROTH vs. Traditional?
This is pretty simple. If you qualify and don’t need (or don’t qualify for) the tax deduction, put the money in the ROTH. Why? Qualified ROTH withdrawals are tax free. Traditional IRA withdrawals, even if made after 59 1/2, are subject to income taxes. Bet on that being a bigger and bigger bite of your retirement funds as time passes.

Just a reminder that these are guidelines – neither my firm nor I are qualified tax professionals and therefore do not provide tax advice. Check with your tax professional.

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To Smarter Investing,

Dak Hartsock
Chief Market Strategist
ACI Wealth Advisors, LLC
Process Portfolios, LLC

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Stock Market Outlook Q1 2016

 
 

Impending Bear Market or Just a Sharp Correction?

In this update, I ask (and answer) the question of whether we are on heading into a damaging Bear Market or if it’s more likely what we are seeing is just a sharp correction.

The video is front loaded with the “executive summary” in the first 4 minutes or so, but I’ve included a deep dive into what I’m seeing in the markets to frame my current view.

I tackle concerns about oil & energy, our economy, the global economy, and the perceived risks in China that seem to crowd the headlines.

In slide 11, the red line somehow moved when I converted the presentation to video. It should be around 23.5 rather than the 27 or so displayed. FYI.

You might also want to pause at the end of slide 7 – the final bullet points went by a bit fast.

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Warms Regards,

Dak Hartsock
Chief Market Strategist
ACI Wealth Advisors, LLC
Process Portfolios, LLC

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2015 Process Portfolios Performance Summary

 
 

Press play to for the 2015 performance summary for all 6 Process Portfolios.

Highlights:
* 4/6 Portfolios beat their benchmarks.
* 3/6 portfolios beat the market (only 1 is designed to do that). All 3 featured about 30% less risk than buying the market.
* Significant out-performance in Market Income Portfolio and strong 2nd half performance in Durable Opportunities Portfolio.
* Video also contains a very brief discussion of key investment risks to watch in 2016.

Please review relevant disclosures by clicking the buttons at the bottom. As you know, investing involves risk. Past performance is no guarantee of future results. Opinions expressed in the above video are not guarantees.

Please share with the buttons below, and as always feel free to get in touch with questions by calling the office or reaching out via email.

Warm Regards,

Dak Hartsock
Chief Market Strategist
ACI Wealth Advisors, LLC.
Process Portfolios, LLC.

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Recession Watch

 

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image source unavailable

Is 2016 the Year of Recession? This question seems to be on everyone’s mind and even the media talking heads have jumped on it to grab readers & viewers.

Spoiler: As of today, there is no recession on the horizon. The Recession Probability Indicator (“RPI”) scored a 12 at the most recent reading, meaning the economic environment for investment is stable. That is subject to change, but as with all things that have to do with investing; it’s better to take direction from facts and not fears. My personal opinion is that the odds of recession are higher in 2016 than they were in 2015, but the fact remains: no recession yet on the horizon.

That doesn’t mean the market can’t go up and down (sometimes a lot), but that history vastly favors those who stay invested despite volatility, as long as there is no recession imminent. Don’t take my opinion, click the title at the right to see the facts– Why Recessions Kill Investment Portfolios.

Here’s some simple and quick proof-in-the-pudding: Pretend you had $200,000 to invest in January 2000. The first block gets invested the way financial salespeople tell you to invest – it’s going to stay invested no matter what because you “have to be in it for the long term.”

The second block of $100,000 is, to be simple, going to move to 100{1b789970f5b587cdad7e2a0d5c032cbf2e438ab9022fea5c2ba3cf7af142fa35} cash as soon as it looks like there may be a recession coming. Call that the “RPI Guided” for Recession Probability Indicator.

Where are these two investments at the end of December 2015?

As you can see below, it pays to make rational decisions about investments rather than getting caught up in short term volatility or whatever the media clones are spouting off about.

RPI Table Dec 2015

As I observed in one of last month’s articles, We May Have a Bump Coming in the Markets (click title to read), it wasn’t clear a Fed rate raise was going to be the positive short term catalyst many market observers & participants thought. It may be that much of what we are seeing as we start 2016 is the holiday-delayed reaction to the Fed raise, mixed in with a liberal dose of alarming headlines arising from a wide spectrum of topics, some of which have no real bearing on investing. Some (me) might say most of which have no real bearing on investing.

Remember, fear helps the media sell advertising and stock brokers earn commissions, but it sure as heck doesn’t help investment portfolios do what they are supposed to do, which is be there for you when you retire, with the assets you need to live the way you want to. Don’t let short term noise get in the way of a solid plan. Only impending recessions should do that, and if you have a real investment plan, you already know what you are going to do when the next recession comes.

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To Smarter Investing,

Dak Hartsock
Chief Market Strategist
ACI Wealth Advisors, LLC.
Process Portfolios, LLC.

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Why Recessions Kill Investment Portfolios (and Poorly Protected Retirements)

 

image source dreamstime
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Why Recessions Kill Investment Portfolios (and Poorly Protected Retirements)

We’ve all heard “You’ve got to be in it for the long term,” or “You can’t catch the rallies unless you are in the market” from brokers or financial salespeople (they prefer “financial advisor”) and as a result more than one investor has had night sweats or an obsessive compulsion to check portfolio balances several times a month when the market starts selling off hard.

But that thinking is incredibly costly:

As you can see from this 25 year market study from Hepburn Capital Management, catching the rallies isn’t nearly as important as missing the valleys.

Best & Worst Mkt Days

Click graphic to enlarge

If you are like most people, the above makes it pretty clear that your broker or financial salesperson (ahem, “financial advisor”) isn’t giving you the facts.

Bottom line: If you missed the best and the worst over the last 25 years, you are almost doubling your investment performance. Reasonable risk for reasonable return is good label and it’s how the most successful investors handle their accounts.

What does this really tell us?

The worst times for investing are prior to recessions. Put your money to work ahead of a recession and most likely you will have to live with years of losses before your account even makes it back to break even. Why is that?

Gains and Losses

Click to enlarge

The above shows you the gain required just to get back to break even. Following the DotCom crash, it took the market about seven years just to get back to break even. Following the Great Recession, it took about five years and that was with massive, unprecedented government support in the form of trillions of quantitative easing.

Still not buying it? Here’s an even simpler example; Pretend you had $200,000 to invest in January 2000. The first block gets invested the way financial salespeople tell you to invest – it’s going to stay invested no matter what because you “have a long term plan.”

The second block of $100,000 is, for the sake of simplicity, going to be moved to 100{1b789970f5b587cdad7e2a0d5c032cbf2e438ab9022fea5c2ba3cf7af142fa35} cash as soon as it looks like a recession may be coming – Call that “RPI” guided for Recession Probability Indicator. CLICK HERE to get the most recent recession probability reading.

Total RPI Guided ROI

Click graphic to enlarge. Both examples exclude dividends.

Now, this is just an illustration, but it’s pretty clear that getting out before things get bad and getting in after things have already started to recover may be a very good thing. Consider that in this illustration, the RPI guided account would be 97{1b789970f5b587cdad7e2a0d5c032cbf2e438ab9022fea5c2ba3cf7af142fa35} higher AND you didn’t have to lose sleep at night worrying if your portfolio was going to be ruined while you were “in it for the long term.“ Protecting the RPI guided account when investment conditions were not favorable made a huge difference between these two investment accounts. H-U-G-E.

The fact is, both of these accounts are in it for the long term, but normal “buy and hold” was also in it for the best days at the price of being in it for the worst days. As we’ve seen, this is too high a price to pay for most investors.

Now, your financial salesperson may have also told you that you can’t predict recessions. That is not true. The Federal Reserve, along with dozens of other in-the-know players like hedge fund and mutual fund managers, track certain sets of data to give them a heads up when a recession is coming. Nothing in life is absolutely guaranteed except death, taxes, and calls from telemarketers but these data sets – things like consumer price index, retail sales, leading indicators, purchasing managers index, etc. can be assembled to give a pretty good picture of when recessions are most likely. In the past, they have given a warning signal anywhere from three to nine months before the market realizes we’re in a recession and acts accordingly.

RPI S&P Warning

Click graphic to enlarge

In the above illustration, the RPI gave a recession signal in January 2008 and confirmed it in March 2008, which would have spared many investors heartache (and dollars). Is it perfect? No. The market bottomed in March 2009 and the RPI didn’t give a reinvestment signal until October 2009, seven months later. But look at the table above the graph. Even missing that seven months, the RPI guided account still saw serious and sustained gains vs. the buy and hold.

There are no guarantees the RPI will spot the next recession – in the last 30 years it’s accurately warned of a recessionary bear market a bit over 70{1b789970f5b587cdad7e2a0d5c032cbf2e438ab9022fea5c2ba3cf7af142fa35} of time. Of course, there are no guarantees you will be robbed tonight – but I’ll bet your house is probably equipped with an alarm anyway.

Whatever a thief would take from your house is worth substantially less than your investment account(s). Sleep better knowing ACI is monitoring a pretty good alarm built to help protect your money.

Remember, successful investing isn’t about catching the rallies nearly as much as it is about missing the valleys.

To get a monthly update on the likelihood of recession in the form of the Recession Probability Indicator (and other good stuff), sign up at the top right.

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To Smarter Investing,

Dak Hartsock
Chief Market Strategist
ACI Wealth Advisors, LLC.
Process Portfolios, LLC.

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Process Portfolios Performance Update October 2015

 

Web-Ready-Process-Portfolio

Market Beating Portfolios – Performance Update October 2015

The video below reviews performance for all 6 Process Portfolios for the month of October as well as year-to-date results. For reference, I’ve include a table of 2015 year-to-date performance for the major indices & asset classes above the video player. It hasn’t been an easy year, but Process Portfolios live portfolios and designed models have managed to achieve reasonable performance for less risk than owning an index fund, and in some cases have also provided considerably better results. Not too shabby.

Asset Class Updates October _2016

 
 
 
Click to enlarge.

 
 
 

The video below is organized so that bottom-line oriented people will get what they are looking for in the first 3 or so minutes and those interested in a bit more detail can stick around for the discussion. Portfolio descriptions including risk management available at the end of the video.

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Warm Regards,

Dak Hartsock
Chief Investment Strategist
ACI Wealth Advisors, LLC.
Process Portfolios, LLC.

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Is the S&P 500 Over Valued? Yes. What Should You Do? Market Valuation Update November 2015

 

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Is the S&P 500 Over Valued? Yes. What Should You Do?

Market Valuation Update November 2015

I’ve broken this update into 2 parts. The first will just give the big picture summary for my executive type clients and the second, below the illustrations, is a discussion of the factors involved for those interested.

The S&P 500 earnings in the last 4 quarters have fallen about 12{1b789970f5b587cdad7e2a0d5c032cbf2e438ab9022fea5c2ba3cf7af142fa35} vs. the previous 4 quarters. Price is about the same. What does this mean for investors?

Part 1 – Findings
Buying the S&P 500 Index at current prices offers total expected returns in the 1{1b789970f5b587cdad7e2a0d5c032cbf2e438ab9022fea5c2ba3cf7af142fa35} – 4{1b789970f5b587cdad7e2a0d5c032cbf2e438ab9022fea5c2ba3cf7af142fa35} range over the near-to-intermediate term based on current earnings. The index does not represent a good opportunity to most investors at current valuation, which is about 20{1b789970f5b587cdad7e2a0d5c032cbf2e438ab9022fea5c2ba3cf7af142fa35} higher than the 10 year average value of the S&P 500.

There is about a -16{1b789970f5b587cdad7e2a0d5c032cbf2e438ab9022fea5c2ba3cf7af142fa35} margin of safety associated with buying the S&P 500 at the current earnings level. In English, that means that buying the S&P index now could mean unrealized losses in the area of -16{1b789970f5b587cdad7e2a0d5c032cbf2e438ab9022fea5c2ba3cf7af142fa35} for a few quarters IF earnings don’t recover. For the record, my current view is they will.

Commentary: Earnings appear to be recovering in the index and many (but not all) of the factors driving recent earnings weakness may be transitory. The American Economy is expanding, albeit slowly, while consumer spending (70{1b789970f5b587cdad7e2a0d5c032cbf2e438ab9022fea5c2ba3cf7af142fa35} of the economy) is still fairly strong and appears to be increasing. Both factors should give a lift to earnings over the next few quarters, and therefore the price of the S&P 500 Index.

In the meantime, it’s probably best to seek investment opportunities away from the main stock indices, and in the US. There are solid earnings and reasonable value in several sectors including non-internet technology. Look to avoid or minimize excess exposure to assets threatened by dollar strength, Europe, South America and other less developed markets.

If you are participating in a 401k plan are unsure what to do moving into year end and next year, email me and we’ll see what can be done to put you on the best investment footing possible for 2016. —-> Contact Dak

  • SPY TTM EPS

  • SPY QTR EPS

  • SPY TTM EPS


* Negative price-to-earnings ratios during the Great Recession have been set to “0” for the graphic above to make the chart more readable, and extremely high one-time p/e’s have been capped at 25 for the same reason. Click the graphics to make them larger.

Part 2 – Discussion (optional reading)
The problem with this is not so much the reduced earnings so far in 2015 (which would be scarier if the economy was heading into recession but it isn’t), but whether historical valuations for the S&P 500 support higher prices based on current earnings. The answer to that is probably not. Earnings need to recover in order to drive the S&P meaningfully higher.

Before you panic and hit the sell button, understand that while the S&P 500 itself may not be a good investment at the moment, that doesn’t mean there aren’t good stock investments available. Most sophisticated managers look for investment opportunities beyond the S&P 500, I among them. There are solid investment opportunities out there, but right now buying the S&P 500 index probably isn’t one of them.

Why?

We saw the S&P 500 move up pretty aggressively in 2013 and 2014, but earnings began to fall as we entered 2015 due to a variety of factors I won’t get into here. The result? As earnings have fallen the valuation of the S&P 500 has risen, eroding the margin of safety in the index and also lowering expected future returns.

Because price has not followed earnings down, the S&P is a bit rich right now (about 20{1b789970f5b587cdad7e2a0d5c032cbf2e438ab9022fea5c2ba3cf7af142fa35} higher than the average 10 year valuation). This doesn’t mean it’s going to collapse, nor is the index in bubble territory. It does mean that investors are willing (so far) to pay more for less, unsurprising given alternatives in the fixed income world.

Investors continue to accept lower returns in the S&P for the simple reason that interest rates are low and basically force investors to hold risk assets. The S&P 500 in the form of the ETF SPY is one of the best known and widely owned risk assets available, which makes it the purchase of least resistance for index investors of all sizes.

To understand whether you should invest and where, it’s important to understand a few key concepts. Some clients are already familiar with these concepts. Feel free to skip.

How the Market is Priced.
The stock market is driven by valuation, and valuation is driven by earnings. This is how the wealthiest investors think, and they use that thinking to help them manage their investment risk. The term is “margin of safety” and it’s an important concept. Successful investors are searching for that margin of safety, whether they are small investors with a million or two, or a mutual fund with hundreds of billions under management. Big or small, investment success demands the same discipline.

Generally speaking, the higher the valuation versus the historical average valuation, the lower your margin of safety.

There is another side to this coin –“expected return“–it’s the potential reward you may receive for buying at a certain valuation level. The lower the valuation versus earnings, the larger the margin of safety and the larger the expected return.

Add expected return to the dividend payout and you get “total expected return” which is exactly what it sounds like.

That’s it. Hope this update helps you sort through the useless noise in the financial news.

If you have additional questions feel free to reach out, and please share using the buttons below.

Warm Regards,

Dak Hartsock
Chief Market Strategist
ACI Wealth Advisors, LLC
Process Portfolios, LLC.

Next week’s updates:
* Process Portfolios Performance Update
* Controlling Long Term Health Expenses

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Jobs Up, Spending Solid. Will December Bring Santa or the Grinch? RPI & Business Conditions Update

 
 

The Market has circled back around to concerns about a possible Fed rate raise and weakness in overseas economies since recovering in October, losing over 2% as of today’s writing. But recent data suggest little in the way of changes in US economic data – jobs are trudging along with a slight recent improvement, consumer spending is stable and appears to be strengthening into the holidays, and the recent fall in oil prices will be help keep a damper on inflation while supporting holiday spending.

The Recession Probability Indicator (“RPI”) most recent reading is 12, denoting a stable investment environment where the economy is supportive of continued investment with little to no current risk of recession. A growing economy is supportive of future earnings, which is a positive for the stock market.

If you are new to the RPI, it’s a tool to measure the strength of the American economy and the safety of the investment climate. It’s built on data from the Federal Reserve and has demonstrated itself to be highly effective on a historical basis.

CLICK HERE to learn more about the RPI and see an illustration of it’s potential impact on investing. Scroll down to look at the updated tables. You will be impressed.

For those interested, below is my summary opinion of current conditions and whether the Fed is going to act like Santa or the Grinch in December;

Although prices in some sectors of the market are a bit high, overall they are still within historical ranges and not in bubble territory. Many sectors are at or near fair value. If the economy appears supportive of current stock prices, why the the choppiness we’ve seen since starting November? First, the media has to talk about something to create attention and sell ads. Playing on fear is one of the most effective tools for capturing consumer attention.

Second, the Fed has been sending mixed messages for months which prolongs uncertainty — the only thing that is clear is the Fed wants to raise rates but hasn’t been able to pull the trigger yet.

Third, October was a strong month for the market and it’s perfectly normal for the market to give back some gains following a big move up. Barring nasty earnings surprises or a changing probability of recession, a pullback following a run like October gives the market time to consolidate in order to move higher in the future.

So, will the Fed raise rates in December and what will happen when/if they do?

As of today, approximately 68% of analysts and traders are predicting a raise in December. There have been few if any changes of import since the Fed declined to raise in September and inflation risks continue to muted. My opinion, right or wrong, is for rate liftoff in early to mid 2016 and no raise in December. We’ll see. If I’m going to be wrong on the Fed rate raise, December is probably the month it happens.

When the Fed does raise, be it December or later, will markets react? More than likely. However, the Fed isn’t going to raise aggressively, and the increments will be small and gradual. The decision is unlikely to impact equity markets except in the very short term.

Here is a link to the November Business Conditions Summary from the American Institute for Economic Research for interested readers—> CLICK HERE

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Warm Regards,

Dak Hartsock
Chief Market Strategist
ACI Wealth Advisors, LLC.
Process Portfolios

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Investment Management

For ACI, investment management begins with understanding and actively managing risk for our clients and partners.  We do this through smarter investments built on low cost, highly liquid and diversified investments rather than expensive financial products. CLICK HERE to learn more.

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RETIREMENT INCOME PLANNING

Understanding the needs of investors seeking stable results for portfolios greater than $500,000 is a core strength of ACI.  One of the most important things we do is help your investments to create stable income while generating sufficient growth to meet your future demands and the needs of those you care for. 

ACI uses customized planning software to create retirement income plans to meet the specific needs of each of clients while providing confidence, flexibility, and cost efficiency.

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FINANCIAL PLANNING

Success in any endeavor comes from hard work, vision, and planning. We can help you create a more confident future by working with you, your CPA, your tax and estate counsel to make sure that when the tomorrow becomes today, you are where you want to be.

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Market Income

This portfolio invests in a basket of highly liquid Index or Sector securities and sells off atypical returns in exchange for a premium on a rolling basis. That’s a fancy way of saying we take the bird in hand and let someone else have the two in the bush.  We buy sectors that are undervalued relative to the rest of the market or vs. their historical value ranges which reduces downside risk vs. the broad market.  Typically out-performs in bear markets, neutral markets and mild bull markets while under-performing strong bull markets.

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Core Equity

Invests in diversified components of the financial markets and broad economy by targeting sectors which demonstrate the greatest potential for a consistent range of multi-year returns, while seeking a risk adjusted investment profile equal to or lower than the broad markets.  Our research tells us which sectors demonstrate the greatest potential for consistent multi-year returns while offering risk efficiency comparable or greater than the broad markets.  We invest on an “Outcome Oriented” basis – meaning we believe we have a good idea what the returns over time will be at a given purchase price.

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Durable Opportunities

This portfolio invests in companies possessing a Durable Competitive Advantage.  Such companies are likely to be around for decades, easing the concern of principal return.  DCA companies often suffer less in bear markets and usually lead recoveries.  These investments may allow ACI to build portfolios with minimum expected returns that may be in the mid-single digit range over any 3-5 year period which can provide long term stability partnered with long term growth in equity.

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Full Cycle

This portfolio is derived from the ground breaking work in ‘risk parity’ by Ray Dalio, arguably one of the top 10 money managers in history and founder of Bridgewater Associates.  The Full Cycle portfolio is built on the allocation models Ray designed to provide the highest potential risk adjusted returns possible through all phases of the economic cycle.  Bridgewater’s “All Weather” fund was designed for pension funds and other large institutional investors that needed to earn stable returns with stable risk, and has been closed to new investors for years.  At the time the fund closed, the All Weather Portfolio had a minimum required investment of $100 million.

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Equity Builder

This is a risk management overlay which helps build and protect accounts by collecting small premiums against held positions on an opportunistic basis during correcting markets.  EQB seeks to collect an extra 2% – 5% per year against the cost of underlying investments.  While primarily targeted at increasing account equity, EQB gives an extra layer of protection to capital during periods of higher volatility.

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Fixed Income

Diversified, broad exposure to fixed income ETFs and best of breed no load funds including core fixed income components such as Government, Corporate or MBS, municipals, and unconstrained “Go Anywhere” funds.

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ACI Investment Team

 

Dak Hartsock; Investment manager with over 15 years of experience with securities & securities options. Dak has worked full time in the financial markets since 2007. He has more than a decade of operating experience as a business owner & developer, with substantially all personal net worth invested in ACI. He is a graduate of the University of Virginia.

Robert Hartsock; MBA. Bob has over 30 years of senior management experience in diverse markets, products and businesses. He brings an exceptional record that includes management roles in two Fortune 500 companies and leadership of 7,500+ employees. Bob’s career features a specialization in identifying and fixing management and operational problems for multiple companies including leading over a dozen acquisitions, private placements and a public offering. He is uniquely positioned to provide ACI with highly relevant C-Level management perspective. Bob provides operational & macro perspective on investments ACI undertakes for client portfolios. Bob holds degrees from University of Illinois and University of Washington.

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Privacy Policy & Disclosures

 

Email info@aciwealth.com, call 888-407-4472, fax 888-407-0161 or write to ACI Wealth Advisors 999 Vanderbilt Beach Road, Suite 200 Naples, FL 34018 to receive a complete copy of our privacy policy and disclosures.

ACI HAS A STRINGENT PRIVACY POLICY.

Our Commitment to You

ACI does not share your email address or contact information with third party marketers under any circumstances, except as required by law.

ACI protects the security and confidentiality of the personal information we have and make efforts to ensure that such information is used for proper business purposes in connection with the management or servicing of your account. Our relationship with our clients and partners are our most important assets. We understand that you have entrusted us with your private information, and we do everything we can to maintain that trust. This is not a contract, rather it is a statement of our intent.

ACI works to provide access to products and services that benefit our customers. We may share non-public personal information with non-affiliated third parties (such as brokers and custodians) as necessary for us to provide agreed services and products to you consistent with applicable law. We may also disclose non-public personal information to other financial institutions with whom we have joint business arrangements for proper business purposes in connection with the management or servicing of your account, as approved by you. In addition, your non-public personal information may also be disclosed to you, persons we believe to be your authorized agent or representative, regulators in order to satisfy ACI’s regulatory obligations, and as otherwise required or permitted by law. Lastly, we may disclose your non-public personal information to companies which help administrate our business. Companies we hire to provide services of this kind are not allowed to use your personal information for their own purposes and are contractually obligated to maintain strict confidentiality. We limit their use of your personal information to the performance of the specific service associated with servicing your account. To repeat, we do not sell your non-public personal information to anyone.

This web site is intended to provide general information about ACI Wealth Advisors (“ACI”). It is not intended to offer personalized investment advice, nor a solicitation to buy or sell securities. Information regarding investment products, strategies, and services is provided solely for educational and informational purposes to enable visitors to learn about our investment philosophy and strategies, and to be able to contact us for further information. Other information provided on the site, including updates on the Recession Probability Indicator (“RPI”) are presented for educational purposes and are not recommendations to buy or sell securities or solicitation for investment services. ACI does not provide personalized investment advice over the internet, nor should any information or materials presented here be construed as personalized investment or financial advice to any viewer. ACI is not a tax advisor and investors should obtain independent tax advice regarding investments.

ACI Wealth Advisors, LLC (“ACI”) is a Registered Investment Advisor (“RIA”), registered in the State of Florida and the State of California. ACI provides asset management and related services for clients in states where it is registered, or where it is exempt from registration through statute, exception, or exclusion from registration requirements. ACI will file and maintain all applicable licenses as required by the state securities boards and/or the Securities and Exchange Commission (“SEC”), as applicable. ACI renders individualized responses to persons in a particular state only after complying with the state’s regulatory requirements, or pursuant to an applicable state exemption or exclusion.

Market data, articles, blogs and other content on this web site are based on generally-available information and are believed to be reliable. ACI does not guarantee the accuracy of the information contained in this web site, nor is ACI under any obligation to update any information on the site. Information presented may not be current. Any information presented on this site should not be construed as investment advice or a solicitation to buy and sell securities under any circumstances.

ACI will provide all prospective clients with a copy of our current FORM ADV, PART II (“BROCHURE”) prior to commencing an Advisory relationship. Existing clients receive a copy on an annual basis. If you have any questions regarding Compliance and Regulatory information, or would like to receive a copy of Form Adv, Part II, please email info@aciwealth.com or call 888.407.4472.

Past performance is no guarantee of future results. Investing involves risk, including reduction or loss of principal. Returns and principal value will move up and down and investments can be worth more or less than original cost when sold. Nothing on this site should be construed as a guarantee of future performance.

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Model & Performance Disclosures

Disclosures Regarding Investment Performance Reporting in compliance with Rule 206(4)-1(a)(5). Market Income Portfolio 1. The performance of the broad market over the same time periods is included for both model and live portfolio to help investors understand market conditions present during the period examined by the model and during live investment. 2. Listed Index models and graphs do NOT include transaction, fund or Advisor Management fees as the index model is not available for investment. Live portfolio results include all fees, including Advisor Management fees. 3. Model results do NOT reflect reinvestment of dividends or other earnings. Actual results reflect limited reinvestment of dividends and other earnings, but do not reflect the impact of any applicable taxes which vary by investor and account type (deferred account vs. taxable, etc.). 4. Investing involves risk, including risk of loss and/or principle. While the Index model has historically shown reasonable performance versus the S&P 500 on a risk adjusted basis, there is no guarantee that will continue into the future. Market Income is designed to provide reasonable returns for less risk than the broad market on a risk adjusted basis, and while the firm believes model portfolios are capable of continued outperformance on this basis, there is no guarantee they will do so. Comparisons with the S&P 500 are included to help the average investor understand how an investment in Market Income may differ from investment in an index fund such as an S&P 500 index fund. 5. The model for Market Income is the Chicago Board of Exchange S&P 500 Buy/Write Index or “BXM.” BXM has historically displayed less volatility than the S&P 500 and Market Income. BXM cannot be directly invested in. Market Income does not exactly follow the BXM index model – the mechanics of closing and opening positions differ – BXM opens, closes or rolls positions on the same day every month regardless of the profit or loss in a position – Market Income generally, but not always, waits until after expiration before transacting. Market Income will also close or roll ahead of expiration if the position has a high percentage of profit present in order to capture that gain. Options are generally sold again within a week of the closure of the prior position, but not always, and often new position may be opened the same day the prior position is closed. Benchmark and index comparisons are made on a best available basis – meaning that both the index model and live performance are believed to be compared with market and the closest possible benchmark for simplicity of comparison. However, there is no guarantee future volatility will be either less than, equal to, or greater than the volatility experienced in the model or the S&P 500 although the firm invests with an eye on reduced volatility vs. the S&P 500. 6. The model portfolio (BXM) utilizes the S&P 500 as its basis. Market Income differs from BXM in that the underlying securities are primarily selected on the basis of “relative” value. This simply means that sectors are compared with one another and Market Income generally invests in the sector or sector(s) trading at the greatest discount or the smallest premium relative to its historical average valuation. Other factors are also considered including sector earnings growth and expected return versus other available sector instruments. Advisor believes this gives Market Income a higher margin of safety than repeatedly investing in the S&P 500 on a rolling basis without regard to value or prevailing economic conditions, while preserving liquidity. 7. The BXM model on which Market Income is based is a non-traded index. As such, results do not represent actual trading or investment and do not reflect any impact that material economic or market factors may have had on the advisors decision making if advisor had been managing live money during the period the model covers, including transaction, fund, or management fees. 8. Market Income also differs from the BXM model in that Market Income seeks to reduce investment during recessionary economic periods while BXM stays invested regardless of economic or market conditions. Advisor believes this will better protect capital vs. BXM model but is materially different than staying invested in all market conditions. This action may cause Market Income to have reduced participation in markets that continue to move up despite Advisors reduction in investment. 9. Advisor clients have experienced results that exceed the performance of the model to date. There is no guarantee Market Income will continue to outperform BXM in the future regardless of Advisor efforts to do so. Core Equity Portfolio 1. The performance of the broad market over the same time periods is included for both model and live portfolio to help investors understand market conditions present during the period examined by the model and during live investment. 2. Model is a historical back test and includes brokerage and fund fees but does NOT include Advisor Management fees which vary by account size, but in general reduce annual performance by approximately 1.5%. Live portfolio results include all fees, including Advisor Management fees. Historical back-test means the model portfolio has been tracked on a backwards looking basis prior to the beginning of live investments in order to establish historical risks and results for investment in this portfolio. Back testing has certain inherent limitations as detailed in item #7 below. 3. Model results reflect regular investment of dividends or other earnings. Actual results reflect limited reinvestment of dividends and other earnings. 4. Investing involves risk, including risk of loss and/or principle. While the back tested Core Equity model has historically shown desirable performance versus the S&P 500 on a risk adjusted basis, there is no guarantee that will continue into the future. Core Equity is designed to provide reasonable returns for the same or less risk than the broad market on a risk adjusted basis, and while the firm believes model portfolios are capable of continued outperformance on this basis, there is no guarantee they will do so. Comparisons with the S&P 500 are included to help the average investor understand how an investment in Core Equity may differ from investment in an index fund such as an S&P 500 index fund. 5. The model for Core Equity is built of highly diversified, highly liquid sector and index securities, most frequently low cost ETFs. Core Equity live portfolios do not exactly follow the Core Equity model – variances in investor contributions, withdrawals, and risk tolerances result in measurable drift from the model. Over time, client accounts come closer in line with the Core Equity model. Core Equity live portfolios may differ from the Core Equity model in an additional material way; when valuations on certain sectors become overly stretched versus their historical average valuations, the Advisor may reduce exposure to those sectors in favor of a sector position which is priced in a more reasonable range in comparison to it’s typical historical valuation. Periodically, Core Equity may allocate a small but measurable percent of assets (up to 5%) in volatility linked instruments in an effort to better manage the portfolio. These factors may result in greater or less than model performance over time. Benchmark and index comparisons are made on a best available basis – meaning that both the index model and live performance are compared with market and other benchmarks the Advisors believe to be suitable for simplicity of comparison. However, there is no guarantee future volatility or performance will be either less than, equal to, or greater than the volatility or performance experienced in the model or the S&P 500 although the firm invests with an eye on reduced volatility vs. the S&P 500. 6. Core Equity invests in diversified components of the financial markets and broad economy by targeting sectors or indices which demonstrate potential for a consistent range of multi-year returns, while seeking a risk adjusted investment profile equal to or lower than the broad markets. These sectors contain a range of equity stocks with an equally broad range of characteristics – some sectors are present in the Core Equity portfolio due to their historically defensive nature, some are present due to their historical growth characteristics, some are a blend of the spectrum between. The intent is to provide a balanced equity portfolio suitable for most investors as an S&P 500 index fund replacement but which seeks lower risk while experiencing, on average, a greater return than an S&P 500 index investment. 7. The Core Equity model results do not represent actual trading or investment and do not reflect any impact that material economic or market factors may have had on the advisors decision making if advisor had been managing live money during the period the model covers, including transaction, fund, or management fees as detailed above in item #2. 8. Core Equity live portfolios also differ from the Core Equity model in that Core Equity seeks to reduce investment during recessionary economic periods while the Core Equity historical model stays invested regardless of economic or market conditions. Advisor believes this will better protect capital vs. model but is materially different than staying invested in all market conditions. This action may cause Core Equity live portfolios to have reduced participation in markets that continue to move up despite Advisors reduction in investment. 9. Advisor clients have experienced results that slightly lag the performance of the model to date. This lag is due to a number of factors, primarily the fact that different clients allocate different dollar amounts to Core Equity at different times. In general, the longer a client has been fully allocated to the Core Equity portfolio, the closer it is to model performance. The benchmark for Core Equity (The S&P 500) has historically displayed greater volatility (risk) than the Core Equity model or live Core Equity portfolios. This may or may not be the case in the future. Market Momentum Portfolio 1. The performance of the broad market over the same time periods is included to help investors understand market conditions present during the period covered by live investment. 2. Listed comparison Index graphs and statistics do NOT include transaction, fund or Advisor Management fees. Live portfolio results include all fees, including Advisor Management fees. 3. Actual results reflect limited reinvestment of dividends and other earnings, but do not reflect the impact of any applicable taxes which vary by investor and account type (deferred account vs. taxable, etc.). 4. Investing involves risk, including risk of loss and/or principle. While the closest benchmark for Market Momentum has historically shown reasonable performance versus the S&P 500 on a risk adjusted basis, there is no guarantee that Market Momentum that will continue such performance into the future. Market Momentum is designed to provide reasonable returns for less risk than the broad market on a risk adjusted basis, and while the firm believes the portfolio is capable of outperformance on this basis, there is no guarantee it will do so. Comparisons with the S&P 500 are included to help the average investor understand how an investment in Market Momentum may differ from investment in an index fund such as an S&P 500 index fund. 5. The closest benchmark for Market Momentum is the Chicago Board of Exchange S&P 500 Buy/Write Index or “BXM.” BXM has historically displayed less volatility than the S&P 500 and Market Income. BXM cannot be directly invested in. Market Momentum differs in key ways from BXM – the mechanics of closing and opening positions differ – BXM opens, closes or rolls positions on the same day every month regardless of the profit or loss in a position – Market Momentum targets closing or rolling positions based on technical factors including trend support and resistance. Market Momemtum will also close or roll ahead of expiration if the position has a high percentage of profit present in order to capture that gain. Options are generally not sold again until the underlying investment has moved into an area of resistance but not always; new position may be opened the same day the prior position is closed. Benchmark comparisons are made on a best available basis – meaning that live performance is believed to be compared with the closest possible benchmark for simplicity of comparison. However, there is no guarantee future volatility will be either less than, equal to, or greater than the volatility experienced in the model or the S&P 500 although the firm invests with an eye on reduced volatility vs. the S&P 500. Market Momentum , like BXM, is an options writing strategy seeking to reduce investment volatility and improve risk adjusted returns for investors. 6. The model portfolio (BXM) utilizes the S&P 500 as its basis. Market Momentum differs from BXM in that the underlying securities are primarily selected on the basis of “relative” value. This simply means that sectors are compared with one another and Market Momentum generally invests in the sector or sector(s) trading at the greatest discount or the smallest premium relative to its historical average valuation. Other factors are also considered including sector earnings growth and expected return versus other available sector instruments. Advisor believes this gives Market Momentum a higher margin of safety than repeatedly investing in the S&P 500 on a rolling basis without regard to value or prevailing economic conditions, while preserving liquidity. 7. The BXM model on which Market Momentum is compared is a non-traded index. As such, results do not represent actual trading or investment and do not reflect any impact that material economic or market factors may have had on the advisors decision making if advisor had been managing live money during the period the model covers, including transaction, fund, or management fees. 8. Market Momentum also differs from the BXM model in that Market Momentum seeks to reduce investment during corrective or recessionary economic periods while BXM stays invested regardless of economic or market conditions. Advisor believes this will better protect capital in comparison to BXM but such action is materially different than staying invested in all market conditions. This action may cause Market Momentum to have reduced participation in markets that continue to move up despite Advisors reduction in investment. 9. Advisor clients have experienced results that exceed the performance of the benchmark to date. There is no guarantee Market Momentum will continue to outperform BXM in the future regardless of Advisor efforts to do so. Durable Opportunities Portfolio 1. The performance of the broad market in the form of the Dow Jones Industrial Index over the same time periods is included for live portfolio comparison to help investors understand market conditions present during the period covered by live investment. 2. The Index results do not include brokerage, transaction, or Advisor fees. Live portfolio results include all fees, including Advisor Management fees. 3. Actual results reflect limited reinvestment of dividends and other earnings. 4. Investing involves risk, including risk of loss and/or principle. Portfolios compromised of companies matching the profile of those selected for including in Durable Opportunities have historically displayed superior risk adjusted performance to the Index, but there is no guarantee that will continue into the future. Durable Opportunities is designed to provide investment in companies that firm believes meet a stringent set of criteria firm believes reduces the likelihood of permanent capital impairment while allowing investors to participate in investment in companies firm believes will stand the test of time and provide superior long term returns. While the firm believes the portfolio is capable of outperformance on this basis, there is no guarantee it will do so. Comparisons with the Dow Jones are included to help the average investor understand how an investment in Durable Opportunities may differ from investment in a concentrated index fund such as a Dow Jones Industrials index fund. Durable Opportunities is not restricted to investment in industrial companies or in companies with a specific level of capitalization, unlike the Dow Jones. 5. Durable Opportunities is primarily a value driven strategy; when valuations in holdings become overly stretched versus their historical average valuations, the Advisor may reduce exposure to those holdings by either liquidation or hedging, and may re-allocate funds into a holding which is priced in a more reasonable range in comparison to it’s typical historical valuation. Periodically, Durable Opportunities may allocate a small but measurable percent of assets (up to 5%) in volatility linked instruments in an effort to better manage the portfolio. Benchmark comparisons are made on a best available basis – meaning that live performance is compared with the benchmarks the firm believe to be suitable for simplicity of comparison. However, there is no guarantee future volatility or performance will be either less than, equal to, or greater than the volatility or performance experienced in the Dow Jones Industrials although the firm invests with an eye on reduced volatility vs. the Dow Jones Industrials Index. 6. Durable Opportunties invests in companies firm believes to possess a Durable Competitive Advantage. Such companies are likely to be around for decades, easing the concern of principal return. DCA companies often suffer less in bear markets and usually lead recoveries. These companies allow ACI to build portfolios with minimum expected returns that may be in the mid-single digit range over any 3-5 year period which may provide long term stability partnered with long term growth in equity. There are no guarantees the strategy will be successful in this endeavor. 6. The Durable Opportunities portfolios also differ from the benchmark comparison in that Durable Opportunities reduce investment by hedging or raising cash during recessionary economic periods while Dow Jones Industrial Index reflects 100% investment at all times regardless of economic or market conditions. Firm believes this will better protect capital vs. model but is materially different than staying invested in all market conditions. This action may cause the Durable Opportunities portfolio to experience reduced participation in markets that continue to move up despite Advisors reduction in investment. 7. Advisor clients have experienced results that have lagged the performance of the benchmark to date. This lag is due to a number of factors, primarily the fact that the current high valuation investing environment has made it difficult to identify companies that fit the parameters of Durable Opportunities at a desirable valuation level. Different clients allocate different dollar amounts to Durable Opportunities at different times, which has also impacted the performance of the overall portfolio. Full Cycle Portfolio 1. The performance of the broad market over the same time periods is included for both model and live portfolio to help investors understand market conditions present during the period examined by the model and during live investment. 2. Model is a historical back test and includes brokerage and fund fees but does NOT include Advisor Management fees which vary by account size, but in general reduce annual performance by approximately 1.5%. Live portfolio results include all fees, including Advisor Management fees. Historical back-test means the model portfolio has been tracked on a backwards looking basis prior to the beginning of live investments in order to establish historical risks and results for investment in this portfolio. Back testing has certain inherent limitations as detailed in item #7 below. 3. Model results reflect regular investment of dividends or other earnings. Actual results reflect limited reinvestment of dividends and other earnings. 4. Investing involves risk, including risk of loss and/or principle. While the back tested Full Cycle Portfolio model has historically shown desirable performance versus the S&P 500 on a risk adjusted basis, there is no guarantee that will continue into the future. Full Cycle Portfolio is designed to provide reasonable returns for the same or less risk than the broad market on a risk adjusted basis in all phases of the economic cycle by holding risk weighted non-correlated assets, and while the firm believes model portfolios are capable of continued outperformance on this basis, there is no guarantee they will do so in the future. Comparisons with the S&P 500 are included to help the average investor understand how an investment in the Full Cycle Portfolio may differ from investment in an index fund such as an S&P 500 index fund. 5. The model for the Full Cycle Portfolio is built of diversified, liquid sector and index securities, most frequently low cost ETFs and low cost funds. The live Full Cycle portfolio does not follow the Full Cycle model exactly – variances in investor contributions & withdrawals result in measurable drift from the model. Over time, client accounts come closer in line with the Full Cycle model. Full Cycle live portfolios may differ from the Full Cycle model in an additional material way; when valuations on certain sectors become overly stretched versus their historical average valuations, the Advisor may reduce exposure to those sectors in favor of a comparable position which is priced in a more reasonable range in comparison to it’s typical historical valuation. These factors may result in greater or less than model performance over time. Benchmark and index comparisons are made on a best available basis – meaning that both the index model and live performance are compared with market and other benchmarks the firm believes to be suitable for simplicity of comparison. However, there is no guarantee future volatility or performance will be either less than, equal to, or greater than the volatility or performance experienced in the model or the S&P 500 although the firm invests with an eye on reduced volatility vs. the S&P 500. 6. Full Cycle invests in diversified components of the global financial markets and broad economy by balancing risks with non-correlating or reduced correlation assets in opposition to one another each of which is designed to prosper in some phase of the economic cycle and intended to offset reduced or poor performance in other portfolio holdings. 7. The Full Cycle model results do not represent actual trading or investment and do not reflect any impact that material economic or market factors may have had on the advisors decision making if advisor had been managing live money during the period the model covers, including transaction, fund, or management fees as detailed above in item #2. 8. Full Cycle live portfolios also differ from the Full Cycle model in that the live portfolio may be rebalanced more or less frequently depending on prevailing market conditions. While firm believes this difference positions portfolio for improved risk adjusted performance, it is not clear that this difference results in clear over or under performance versus the Full Cycle model. 9. Advisor clients have experienced results that slightly outperform the performance of the model to date. This outperformance may or may not persist. In general, the longer a client has been fully allocated to the Full Cycle portfolio, the closer it is to model performance. Fixed Income Portfolio 1. The performance of the broad bond markets over the same time periods is included to help investors understand market conditions present during the period covered by live investment. 2. Listed comparison Index graphs and statistics do NOT include transaction, fund or Advisor Management fees. Live portfolio results include all fees, including Advisor Management fees. 3. Actual results reflect limited reinvestment of dividends and other earnings, but do not reflect the impact of any applicable taxes which vary by investor and account type (deferred account vs. taxable, etc.). 4. Investing involves risk, including risk of loss and/or principle. While the closest benchmark for Fixed Income has historically shown reduced volatility and reasonable performance versus many classes of fixed income investments, there is no guarantee that Fixed Income that will continue such performance into the future. Market Momentum is designed to provide reasonable returns for less risk than the broad market on a risk adjusted basis, and while the firm believes the portfolio is capable of outperformance on this basis, there is no guarantee it will do so. Comparisons with US Aggregate Bond Market and PIMCO Total Return are included to help the average investor understand how an investment in Fixed Income may differ from investment in an alternative index or fixed income fund. 5. The closest benchmark for Fixed Income is the Pimco Total Return Fund. Fixed Income differs in key ways from BOND – including selection of underlying investments and reduced diversification. Benchmark comparisons are made on a best available basis – meaning that live performance is believed to be compared with the closest possible benchmark for simplicity of comparison. However, there is no guarantee future volatility and performance will be either less than, equal to, or greater than the volatility and performance experienced by the benchmark although the firm invests with an eye on out performance. 6. The benchmark may include securities not contained in Fixed Income, and vice versa. Fixed Income currently holds significantly more cash than PIMCO Total Return Fund, a situation likely to continue in the near future. This action may cause Fixed Income to have reduced participation in markets that move up despite Advisors reduction in investment. 7. Advisor clients have experienced results that lag the performance of the benchmarks to date. There is no guarantee Fixed Income will continue to outperform benchmarks in the future regardless of Advisor efforts to do so. If you would like to receive an email or hard copy of these disclosures, please email info@aciwealth.com or call 888.407.4472

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Smart Select

Invests in diversified components of the financial markets and broad economy by targeting specific risk levels through a range of Smart Select Portfolios. For example, Smart Select 100 is a 100% equities portfolio, while Smart Select 50 is a 50% fixed income and 50% equities portfolio. These portfolios allow ACI to place our Partners in portfolios built specifically to match their risk tolerance while still serving their personal investment goals. Like most ACI Portfolios, Smart Select portfolios are diversified and low cost.

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Customer Relationship Summary & Reg Best Interest

FORM CRS – Customer Relationship Summary

revision 6/30/2022

Introduction: ACI Wealth Advisors, LLC is a state registered investment advisor (Florida, California, Texas) and is a member of the Financial Industry Regulatory Authority (FINRA). ACI is subject to both state administrators and SEC oversight. ACI provides investment advisory services and planning services under a variety of fee structures. As a single registration advisor, ACI is considered a fiduciary under the law and is one of very few advisors to have selected the single registration path. As part of our learning process, clients/prospects provide answers to questions on an intake form regarding their investment goals, financial situation, financial needs, assets, and risk tolerance. ACI uses this information to provide investment or planning services customized to each person ACI works with.

What investment services and advice can ACI provide? Investment advisory services can include discretionary management of client assets, investment planning, income planning, retirement planning, financial planning, general financial advice and consulting. For the most part, planning services are provided on a flat fee basis of $699. For more complex planning, the fee may be negotiated, or services can be provided at the hourly rate of $250 per hour.

Ask your financial professional: How will you choose investments to recommend to me? What is your relevant experience including licenses, education and any other qualifications? What do these licenses and qualifications mean?

What fees will I pay? Unlike most financial companies, ACI does not accept commissions from 3rd parties for the recommendation of securities funds, mutual funds or securities products. Nor is ACI compensated to buy or sell securities in your account. ACI compensation is a flat fee based on the value of your account on a sliding scale from 1% – 2% annually. Fees may be adjusted at the discretion of the Independent Advisor Representative (“IAR”) you are working with.

Trade costs are determined by the custodian and ACI does not benefit.

Funds, including mutual funds, ETFs, ETNs, etc. have their own management fees which clients must pay to invest in a given fund or strategy. Generally, ACI prefers to use low cost, highly liquid funds in client portfolios. Management and/or administration fees for such funds range from 0.05% up as high as 1.5% for a specialized fund. On average, an ACI constructed portfolio has about 0.3% in fund management or fund administration fees, or about $3 per $1000 invested.

ACI receives no compensation from fund managers or administrators for investing client dollars in them.

You will pay fees and costs whether you make money or lose money on your investments. Fees and costs will reduce any amount of money you make on your investments over time. Make sure you understand what fees and costs you are paying. You will see transaction costs disclosed by the trade confirmations sent to you by the custodian.

Ask your financial professional: If I give you $100,000 to invest, how much will go to fees and costs and how much will be invested for me?

What are your legal obligations to me when providing recommendations as my investment advisor? In the course of making recommendations as your investment advisor, including any planning services, ACI and affiliated Independent Advisor Representatives (“IAR”) are required to act in your best interest and put your best interest ahead of ours. This is known as the fiduciary duty.

We are also required to disclose any potential conflicts of interest to clients both verbally and in writing.

One such potential conflict of interest is that ACI Independent Advisor Representatives (“IAR”) may be insurance licensed. Where appropriate and in a client/prospects best interest, fixed index annuities and life insurance products may be offered to clients/prospects through an agent’s affiliated insurance organization. Insurance agents are paid a commission on the sale of insurance products. ACI requires IARs to disclose the potential conflict of interest to clients/prospects in writing, including disclosing the commissions, and requires IARs to make clear that clients/prospects are under no obligation to transact through them.

How do your financial professionals make money? IARs make money from fees based on assets under management, as disclosed above, base salary, and may also earn money from the sale of insurance products through the IAR’s affiliated insurance organization.

Do you or your financial professionals have legal or disciplinary history? No, at the time of this update, no affiliated financial professionals have a legal or disciplinary history. You may visit investor.gov/CRS for a free and simple search tool to research ACI and any affiliated financial professional.

Additional Information: Please see additional Regulation Best Interest Disclosures below.  If you would like to discuss this form or have questions, please call 888-407-4472.

 

ACI Rollover Recommendations Under Regulation Best Interest (Reg Bl)

revision 6/30/2022

The purpose of this document is to help you in understanding how ACI works with clients like you. 

You can use this material to decide whether to proceed with a rollover without a recommendation from ACI.  If you do want a recommendation, your ACI financial professional will discuss the advantage of doing a rollover vs. leaving your assets in your retirement plan and will make a recommendation based on your best interest. 

Conflict of Interest in IRA Rollover Recommendation:  There is an inherent conflict of interest in the recommendation to rollover retirement plan assets into an IRA managed by ACI.  ACI will make money on your assets in the form of a management and/or performance fee if you choose to roll your retirement plan into an ACI managed IRA.  If you do not rollover your retirement plan, ACI will not make any money for managing your assets. 

ACI Independent Advisor Representatives (“IAR”) have the same conflict. 

To help determine whether a rollover recommendation is in your best interest, please consider the following:

Roll over your 401k into an IRA:

Advantages
• Your investments will remain tax-deferred until you withdraw them
• You will have access to a wide range of investments, including mutual funds, ETFs, stocks, bonds, options and more
• You will have access to a wide range of tools, resources, and services
• You may have the flexibility to convert to a Roth IRA
• You may benefit from the advice of your investment advisor, including risk management, income & retirement strategies
• Potential for custom investment portfolios built around you.
Disadvantages
• You will not be able to take a loan against your account
• Any loan balances would need to be repaid prior to rolling over or you may incur income taxes and potentially a 10% tax penalty
• Your investments may incur trading-related costs.
• You are unlikely to have access to the exact same investments in an IRA that you had in your plan.
• The level of protection from creditors for assets in an IRA is lower than in a company retirement plan
• If you hold appreciated employer stock in your former employer’s plan account, there may be tax consequences. You should consult a tax advisor

Leave your assets in your old employer’s plan:
Advantages
• Your investment plan choices may include low-cost, institutional-class products
• Your total costs may be lower than other alternatives
• Your investments will remain tax-deferred until you withdraw them
• You may be able to take loans against your account
• You may not have to take any action or complete additional paperwork
• You may be able to take penalty-free withdrawals if you left your old employer between age 55 and 59
• Your retirement plan balances may be better protected from creditors and legal judgements under federal law
• You may still be able to roll over to a future employer’s plan later
• You would still have access to any investor education, guidance and planning provided to plan participants
• The investment choices on your plan menu were selected by a plan fiduciary

Disadvantages
• Your investment choices could be limited what is available in the plan
• Your former employer may pass certain plan administration or recordkeeping fees through to you
• You would not be able to contribute any new funds
• Managing your investments among multiple accounts can be a lot of work
• You may not be able to access professional advice specific to your situation
• You may need to manage your risk directly

Roll your assets into a new employer’s plan
Advantages
• Your costs may be lower than other alternatives
• Your investments will remain tax-deferred until you withdraw them
• You may be able to take loans against your account
• You may be able to take penalty-free withdrawals if you leave your new employer between age 55 and 59
• Your retirement plan balances may be better protected from creditors and legal judgements under federal law
• Your plan investment choices may include low-cost, institutional-class products
• You may have access to investor education, guidance and planning that your new employer provides to plan participants
• The investment choices on your plan menu were selected by a plan fiduciary
• If you roll over to a new employer’s plan you may not have to take required minimum distributions (RMDs) if you decide to keep working

Disadvantages
• Your investment choices would be limited to those in the plan
• Your new employer may pass certain plan administration or recordkeeping fees through to you
• If you hold appreciated employer stock in your former employer’s plan account, there may be tax consequences. You should consult with a tax advisor.

Take a cash distribution from your retirement plan:
Advantages
• Your money (after any taxes and applicable penalties) will be immediately available to you

Disadvantages
• Your retirement savings will be depleted
• The amount that you cash out will be subject to mandatory 20% withholding for federal taxes if under age 59½
• Your distribution will be subject to applicable federal, state and local taxes
• You may be subject to a 10% penalty if you under the age 59½
• You may lose the compounding advantages of tax deferred investments

If you would like to receive an email or hard copy of these disclosures, please email info@aciwealth.com or call 888.407.4472

 

 

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